By Paul R. La Monica
NEW YORK (CNNMoney) — Now that China’s trade surplus has narrowed to just $13.1 billion, do you think that President Hu Jintao and President Obama will just spend next week’s visit at the White House talking about the weather?
Don’t count on it. This massive trade surplus — and the fact that the United States still views China’s currency as artificially low — is likely to dominate the talks between the two leaders on January 19.
Obama may rightfully point out that U.S. manufacturers will be at an unfair competitive disadvantage to China as long as the yuan is not trading more freely. A lower yuan makes goods exported by China cheaper.
But at the same time, Hu could counter that China’s economic growth is actually slowing and that the trade gap is no longer significant. He could also wryly point out that the Federal Reserve’s bond buying program — the much-maligned QE2 — may not help the dollar appreciate over the long haul either.
With that in mind, experts (including a top Fed official) don’t think that much will change in the near future.
Dallas Fed President Richard Fisher, who visited CNN’s New York offices Tuesday for an interview with CNNI’s Felicia Taylor to appear on “World Business Today,” told me that he doubts China will move too quickly to let the yuan float more freely.
Fisher, who spent time in China serving as an official under both the Carter and Clinton administrations, said that deep down, China still doesn’t completely trust the U.S. and that government officials do not want to be pushed around by foreign demands.
“They don’t want to be hoodwinked,” Fisher said. “China will take their own sweet time to let their currency rise. They will not budge but to relieve some political pressures.”
That view is shared by others. And that’s a concern as the U.S. still struggles with a high unemployment rate amidst worries that America risks falling behind emerging markets like China in the global economic race.